Dubai: Brent crude may fall further this week as multi-year high inventories in the United States and a stronger dollar weighs on prices.
On Friday, Brent crude pared early gains to end 0.47 per cent higher at $48.79 a barrel. Crude oil has been consolidating within a five dollar range for the past couple of weeks.
“We don’t see a great recovery in crude oil despite cold weather conditions in the US, because of the huge inventory,” said Pradeep Unni, senior relationship manager with Richcomm Global Services. Brent may trade in the range of $42-50 in coming weeks.
The US Energy Information Administration said last week that US crude oil inventories rose by 10.1 million barrels last week, the biggest weekly gain since March 2001. Total US crude oil inventories stood at 397.9 million barrels, the highest level since May.
ETF investors and hedge funds have been active buyers of crude oil for several weeks now while energy stocks have recovered strongly. So far it has not reversed the negative trend, only halted it, Ole S. Hansen, head of commodity strategy said from Copenhagen.
“For the next couple of weeks the risk is therefore that we could see a new low. A deep contango (spot crude cheaper than deferred) still exists and until we see this normalise the upside potential is limited,” said Hansen.
Oil prices have fallen nearly 60 per cent since June as the Organisation of Petroleum Exporting Countries resisted calls to cut output, while the US pumped at the fastest pace in more than three decades, creating a glut in global supplies.
